TPG2022 Chapter IX paragraph 9.105

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When one compares a situation where a long-established full-fledged distributor is converted into a limited risk distributor with a situation where a limited risk distributor has been in existence in the market for the same duration, there might also be differences because the full-fledged distributor may have performed some functions, borne some expenses (e.g. marketing expenses), assumed some risks and contributed to the development of some intangibles before its conversion that the long-existing “limited risk distributor” may not have performed, borne, assumed or contributed to. The question arises whether at arm’s length such additional functions, assets and risks should only affect the remuneration of the distributor before its being converted, whether they should be taken into account to determine a remuneration of the transfers that take place upon the conversion (and if so how), whether they should affect the remuneration of the restructured limited risk distributor (and if so how), or a combination of these three possibilities. For instance, if it is found that the pre-restructuring activities led the full-fledged distributor to own some intangibles while the long-established limited risk distributor does not, the arm’s length principle may require these intangibles either to be remunerated upon the restructuring if they are transferred by the full-fledged distributor to a foreign associated enterprise, or to be taken into account in the determination of the arm’s length remuneration of the post-restructuring activities if they are not transferred (see Section E.2 of Part I above and Chapter VI of these Guidelines).